Got Discount Proneness?

Discount Proneness is what happens when you “teach” customers to expect discounts.  Over time, they won’t buy unless you send them a discount.  They wait for it, expect it.  Unraveling this behavior is a very painful process you do not want to experience.

The latest shiny object where Coupon Proneness comes into play is the “shopping cart recapture” program.  Mark my words, if it is not happening already, these programs are teaching customers to “Add to Cart” and then abandon it, waiting for an e-mail with a discount to “recapture” this sale – a sale that for many receiving the e-mail, would have taken place anyway. 

The best way to measure this effect is to use a Control Group.

When I hear people talking about programs like this (for example, in the Yahoo analytics group) what I hear is “the faster you send the e-mail, the higher the response rate you get”.

That, my friends, is pretty much a guarantee that a majority of the people receiving that e-mail would have bought anyway.  Hold out a random sample of the population and prove it to yourself.  There is a best, most profitable time to send such an e-mail, and that time will be revealed to you using a controlled test.  The correct timing is almost certainly not within 24 or even 48 hours.

That is, if you care about Profits over Sales, and trust me, somebody at your company does.  They just have not told you yet!

When you give away margin you do not have to give away on a sale, that is a cost.  Unless you are including that cost in your campaign analysis, you are not reflecting the true financial nature of the campaigns you are doing.  If you are an analyst, that’s a problem.

If you are using cart recapture campaigns, please do a controlled test sooner rather than later.  Because once your customers have Discount Proneness, it will be very painful to fix.

For that matter, if you are an online Marketer in a multi-channel company, you should be regularly using controls because they are the gold standard in Marketing Measurement / Campaign Attribution.

At some point, your boss will be more concerned about attributing Profit than attributing Sales.  Would be nice if your response to this question was, “Yea, we’ve been looking into that”, wouldn’t it?

If you’d like to hear more about this topic and see some example data on what these scenarios look like, you can attend this webinar:

What Online Marketers Can Teach Offline Colleagues (and vice versa)
May 19, 2009  noon ET     Jim Novo, Kevin Hillstrom, and Akin Arikan

A WAA event, open to both members and non-members.  Web analysts are not the first to grapple with multiple channels.  Traditional marketers have always had to illuminate customer behavior across stores, call center, direct mail, etc.  So, rather than reinventing the wheel in each camp, what proven methods can you teach each other?  Three different but aligned approaches on solving the multichannel puzzle, should be something for everyone here.


8 thoughts on “Got Discount Proneness?

  1. Hmmm- I did not have a problem with it on IE – will have them look at it.

    Update: I’m told if you Click “Run System Check” button (Magnifying glass next to webcast title) they can assist; likely a transient problem with 400 already registered. And probably should name that button something else, I’d say!

  2. The Gap may not want to hear this, but I have been trained to go straight to the sales rack. If it ain’t on sale I am not buying because I know that sooner or later everything will go on sale. Curse of knowledge – very hard if not impossible to unlearn something, in this case associating sales with the Gap.

    For the same reason, your conversion rate may suffer if you put a coupon code field on your checkout. The fact that it is there suggests that coupons are to be had and I will go hunting for one (and possibly abandon the sale if I don’t find one).

    As far as shopping cart recapture programs are concerned I agree with you about the need to test. Sometimes all it takes is for a friendly customer service email to offer support and not necessarily a big coupon.

  3. Yes, and that’s the issue with Discount Proneness – if every communication is discount-based, it erodes margins because “Engagement = Discounts”.

    There are people doing successful cart recapture with a service-oriented message, and there are people maintaining Engagement without Discounts.

    Knowing when and how to act in order to maximize profits is what my part of the webinar is about!

  4. That’s a classic!

    The business owner tries pleasing his customers and ends up in a trap +_+

    Nice post Jim!

  5. Having come from a past life in FMCG’s I have been through the discount/promo trail. Unless you are absolutely forced into offering discounts/promo incentives by the opposition – they are doing it so we have to – don’t go there. It is the slippery road to ruin. Discounts should be offered infrequently otherwise the discount “becomes” the normal price and you have to keep offering lower incentives. Promo items are even worse as you keep on having to escalate to keep up with what the opposition is offering and then you end up with a warehouse of stuff you cannot reuse (except to new clients, try keeping track of that, who has got what and what metrics to keep track of) is branded with a product so you can’t cross market to another segment. Then you have to try and sell it off, write it off or give it away.

  6. @ Michael Whitaker – You mentioned that the Gap is training you to go directly to their sales rack… and if nothing is on sale then you’re not buying. I’ve got a few thoughts on this..

    1) These products are approaching the end of their life cycle, when they were new they started at higher price points where customers less price sensitive will buy. Customers who buy earlier on in the product lifecycle are also rewarded by larger selection of sizes/colors. My guess is that once The Gap has felt they’ve maximized their profits at the higher price point the product gets moved into the sale section. If they didn’t offer it on sale they’d probably not sell all of their remaining inventory and instead take a loss on profit maximization. Those people who are willing to wait until products go on sale take the added risk that they product may or may not be available in the size/color that they want… so you’ll see people take a larger instead of a medium, or a blue instead of a green.. it’s not the perfect fit but the lower price point helps increase sales volume while also maximizing profits.

    In addition, based on seasonality you might be buying summer clothes when going into the fall season etc. So I guess my point is that waiting until products go on the sales rack will not work for everyone.

    2) You can use the sales rack as a way to drive traffic into your store, people want to see what’s on sale but that doesn’t necessarily mean that they’re only going to buy stuff that’s on sale once they get there. Customers will see other newly introduced products and possibly be up sold into the higher margin products.

    I think as long as The Gap is focusing on offering their sales/discounts at the proper points in a life cycle (whether that’s customer life cycle or product life cycle) then that’s the most important thing at the end of the day.


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